Sunday, February 1, 2015

NOSTRO, VOSTRO, LORO Accounts

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Nowadays, bank operations are not confined within a national border. Banks are opening branches in foreign countries. But the problem is - Is it possible for a bank to open branch in each and every country?
Obvious answer is no. Then what is the easiest way to handle this situation?

Open an account in the foreign countries' bank!!
Here Nostro, Vostro and Loro accounts come into play. Note that all these accounts are termed as one's own country-basis.


NOSTRO Account
Italian word 'nostro' means 'ours'. Hence, Nostro account points at - "Our account with you"
Nostro accounts are generally held in a foreign country (with a foreign bank), by a domestic bank (from our perspective, our bank). It obviates that account is maintained in that foreign currency.

For example, SBI account with HSBC in U.K. (may be)


VOSTRO Account
Italian word 'vostro' means 'yours'. Hence, Vostro account points at - "Your account with us"
Vostro accounts are generally held by a foreign bank in our country (with a domestic bank). It generally maintained in Indian Rupee (if we consider India)

For example, HSBC account is held with SBI in India. (may be)


LORO Account
Again, Italian word 'loro' means 'theirs'. Therefore, it points at - "Their account with them"
Loro accounts are generally held by a 3rd party bank, other than the account maintaining bank or with whom account is maintained.

For example, BOI wants to transact with HSBC, but doesn't have any account, while SBI maintains an account with HSBC in U.K. Then BOI could use SBI account. (again may be)



Hope this post is able to clear your doubts!
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Happy learning!

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